Berlusconi to Address Parliament After Losing Budget Vote

AppId is over the quota
AppId is over the quota
October 13, 2011, 4:32 AM EDT By Chiara Vasarri and Lorenzo Totaro

(Updates with yields, spread in sixth paragraph, bond auction in seventh.)

Oct. 13 (Bloomberg) -- Prime Minister Silvio Berlusconi will defend his government in Parliament and may seek a confidence vote after Italy’s president called on him to prove he can still govern after losing a routine legislative vote.

Berlusconi will deliver a speech to the Chamber of Deputies in Rome at about 11 a.m. The premier may also call a confidence vote after President Giorgio Napolitano urged him yesterday to clear up “questions and concerns” about the government’s parliamentary support after the lower house failed to rubber stamp the 2010 budget report in the Oct. 11 vote.

The main opposition parties decided last night not to attend today’s session, leaving Berlusconi to address only his own supporters. The opposition also vowed to vote against the government in the confidence vote likely to be held tomorrow.

“The confidence vote could be a significant event,” Lavinia Santovetti, an economist at Nomura International in London, said in an e-mail. “I would not rule out the ability of the government to, once again, get together and find the numbers to get through the confidence vote. Berlusconi’s leadership is clearly weakening, but a muddle-through could continue.”

Fighting Contagion

Berlusconi is scrambling to convince investors that he can cut Europe’s second-biggest debt and reverse surging borrowing costs that risk making Italy the biggest victim of the euro-area debt crisis. Italy has been downgraded by the three main rating companies in the last month even after the government won final approval for 54 billion euros ($73 billion) in austerity moves that convinced the European Central Bank to buy Italian bonds to bring down record bond yields.

The yield on Italy’s 10-year bond rose 4 basis points to 5.782 percent at 10:03 a.m. in Rome, after closing at a three week-high yesterday. The yield difference with similar maturity German bunds increased 3 basis points to 358 basis points. That spread reached a euro-area record 416 basis points on Aug. 5.

The Treasury will auction as much as 6.5 billion euros of bonds today, following a sale of 9.5 billion euros of Treasury bills on Oct. 11 at which borrowing costs declined and demand rose for the nation’s debt.

Bank of Italy Governor Mario Draghi, in a speech yesterday, urged the government to quickly implement the austerity moves. “If protracted, the high borrowing costs seen in the last three months could largely offset” the effects of the austerity moves approved last month, “with a further negative impact on the cost of debt, in a spiral that may end up being ungovernable,” Draghi said in Rome.

Tremonti Absent

The government’s failure to get a majority in the Oct. 11 vote, which ended 290 to 290, meant last year’s budget wasn’t approved. The tie could have been broken if Umberto Bossi, whose Northern League is in the ruling coalition, or Finance Minister Giulio Tremonti had been present to vote. Their absence sparked speculation that parliamentary support for the government may be unraveling as pressure mounts on Berlusconi from the worsening debt crisis and four criminal trials that he faces. He denies any wrongdoing.

Tremonti has already clashed with Berlusconi over issues including last month’s austerity package and Draghi’s successor at the central bank. He was “engaged at the Ministry” in a review of economic policy during the Oct. 11 vote and was “represented by undersecretaries,” Tremonti said in a statement. There was “no political reason of any kind” for his absence from the ballot, he said.

Scajola’s Role

“Tensions within the coalition are escalating,” Santovetti said. Tremonti and Bossi’s absence from the vote “is probably a clear indication of this.”

Also absent from the Oct. 11 ballot was former Industry Minister Claudio Scajola. He and about 15 allies in Parliament are considering withdrawing their support for the government, affaritaliani.it website said yesterday, citing lawmakers close to the group. Scajola is “ready to bring down the government,” the website said.

Scajola met with Berlusconi in Rome yesterday and pledged that he and his backers will support the government should the premier call a confidence vote, Ansa newswire said yesterday.

While the failed budget vote doesn’t affect this year’s public finances, “it has symbolic importance as approval is required” by the constitution, Fabio Fois, a Barclays Capital economist in London, said in a note yesterday.

Berlusconi must spell out in his speech today how he intends to get last year’s budget report approved, Napolitano said in an e-mailed statement late yesterday. “It will then be up to the speakers of the two houses” of Parliament to decide whether the premier’s suggested solution can work, Napolitano said.

--Editors: Jeffrey Donovan, Andrew Davis

To contact the reporters on this story: Chiara Vasarri in Rome at asarri@bloomberg.net Lorenzo Totaro in Rome at ltotaro@bloomberg.net

To contact the editors responsible for this story: Angela Cullen at acullen8@bloomberg.net. Craig Stirling at cstirling1@bloomberg.net

Technology

News

Posted in: Address,after,Berlusconi,Budget,Losing,parliament